Payback to expand beyond Germany
Multi-partner loyalty scheme Payback is making its first move outside the German market with a launch in Poland in the next few months. Claus-Peter Schrack of scheme owner Loyalty Partner tells Loyalty of its future plans.
The Payback scheme, which is operated by Loyalty Partner, dominates the German loyalty market and claims to cover nearly 60% of the 36.2 million private households in the country. Of the 20 million cards it has in circulation around 80% are used regularly and it claims to be the third most used card in German wallets after the debit card and the health insurance card.
Regarding its latest move Loyalty Partner said several major Polish retailers have signed up for the new programme and that it was in negotiations with others.
“We started planning for international expansion years ago,” said Claus-Peter Schrack, head of corporate communications at Loyalty Partner. “We are targeting eastern Europe because there are some interesting markets like Poland, which also have the critical size to start a multi-partner programme like Payback. The Polish market is only a step away from western Europe levels. We are also looking at other markets in eastern and western Europe and outside Europe but will be going step by step.”
Expansion into the Czech Republic may be a possible future move if the Polish launch is successful.
Schrack added that it would be critical for the success of the programme to get several of the major Polish retailers signed up before launching to make it attractive to consumers. ”Our target is to get a big supermarket, a gas station company, a telecom company and a relevant player in financial services,” said Schrack.
The Polish scheme will also be called Payback and have several of the same features as the existing German programme. Poland was identified as having a profitable and mature retail base with a lot of international retailers operating in the market. As a member of the European Union it has laws in place for customer data security. LP says it does not sell or rent customer data to other companies outside the programme.
Loyalty Partner, which established the Payback scheme in 2000, is now trying to leverage the market knowledge it has built up by establishing a consulting company called Emnos, which specialises in offering customer insight along similar lines to UK-based dunnhumby.
The German Loyalty Market (source: GfK)
% of German households owning cards % of customers using cards
Emnos is carrying out work for Payback and its partners, as well as other major retailers such as France-based Carrefour, to provide insight on customer behaviour and purchasing habits.
With the current economic crisis, Schrack says it is increasingly vital for retailers to really understand what their customers want. “We really know a lot about our 20 million Payback customers, and are able to segment them in different types in terms of their behaviour and perspective,” he added.
LP says the economic crisis is opening up more opportunities for its loyalty services with companies increasingly putting an emphasis on direct marketing activities that are relevant for the individual consumer, and less being spent on generalised TV and print campaigns. “Loyalty Partner is one of the experts in that area, so we will benefit from it,” says Schrack.
In its home market Payback may be about to benefit from the fact that its closest competing loyalty scheme Happy Digits (which claims to have 43% membership among German households) may be closed down, as its main partner the retail chain Karstadt is considering starting its own loyalty programme. According to German media reports Happy Digits only has a 50% redemption rate for points collected.
The other major German scheme is the Deutschland Card started last year as a subsidiary of media group Bertelsmann, which had built up a 13.7% penetration of German households by September 2008 according to data from market analyst GfK. “From a consumer perspective they don’t have enough attractive partners at the moment, so the situation for us seems comfortable,” claims Schrack.
Payback has recently signed extension deals with its major partners in all the major retail sectors, which Schrack says is more important to it than acquiring new partners. Supermarket chain Real has signed up till 2015, the Galeria Kaufhof department store till 2014, and the DM drugstore chain until 2012. The scheme is also in discussions with potential partners in sectors where it so far does not have a presence such as textiles, furniture and DIY retailing.
“One of the most important things we are doing at the moment is leveraging Payback’s online activities,” says Schrack. “It is becoming more and more important for consumers to be able to collect points online.”
The scheme currently has more than 100 retailers as official online partners and is looking to increase this to 200 by the end of 2009.
Another area of focus is in financial products. The Payback Plus debit card was launched in 2007, and it has subsequently issued the Payback Premium Visa credit card which earns points for international spending. “We are trying to bring in more features for our members in financial services,” says Schrack.
The Payback scheme looks to use the customer insight capabilities of its sister company Emnos to help in its targeted communications. It limits the number of customer contacts to 12 a year across the different channels and only with the permission of customers. In 2008 it sent a total of 96 million direct mailings, 1.3 million SMS messages and 167 million email newsletters on behalf of partners. Email campaigns have proved attractive to partners because they are inexpensive to run. The communications are targeted from the buying behaviour of individual customers, so a regular shopper at Real will get, for example, coupon offers at that store.
Schrack admits that it does not have all its cardholders’ email addresses at present, but predicts the channel will become increasingly used in future due to its cost-effectiveness.
Partners in the scheme do not communicate directly with cardholders and they do not share customer data. All Payback mailings are carried out by Loyalty Partner. The scheme does themed communications such as travel and birthday greetings, which also feature limited period coupon offers and special promotions at its retail partners.
Another major marketing tool for the scheme is the Payback account statement which gives a point overview of an individual’s Payback account and is sent to all accountholders 4-5 times a year. It features offers from the partner company which Payback says generates sizeable additional sales for them.
“It’s a classical direct mailing and we have very good response rates to this,” says Schrack. “We are in the field of direct marketing and can offer our partner companies relevant promotions for their customers based on the knowledge we have of them. That is the main thing why we are much more efficient than TV ads or print campaigns.”
In terms of Loyalty Partner’s strategy in more established loyalty markets, Schrack points out that there are no concrete plans at the moment. “We probably would think more about buying an existing business in markets that already have successful multi-partner programmes.
“We have good relationships with Nectar and Air Miles and I think they learn from us and we learn from them. However there are some cultural differences – what works in the UK or Canada wouldn’t work automatically in Germany.”